Alternative Dispute Resolution

What is confusing to many litigants is that even after filing suit or being sued, they often are compelled, by court mandate, to participate in alternative dispute resolution (“ADR”), such as mediation and arbitration. Both are common means and methods of resolving disputes rather than having them decided by a judge or jury. The goal, of course, is a more expeditious resolution in order to relieve the courts of the back-log in the system. However, here the focus is on when ADR is used in lieu of a traditional lawsuit such as when arbitration is the forum selected for dispute resolution when executing a contract. When a challenge occurs to such a selection, Courts have repeatedly taken the position that arbitration is favored over a matter proceeding through the courts. The reasons given most often are that arbitration allows for a speedy, inexpensive, expeditious and less formal way of resolving controversies. Unfortunately, this expediency can often trump justice. The rates charged by arbitrators to hear a matter are often prohibitive and there can also be prohibitive filing fees when utilizing a major arbitration company. Those costs amount to a large initial out of pocket expense. While the cost of the actual arbitration is split by the parties, there is no cost to having a judge hear the matter in court. Further, arbitration often proceeds without full discovery and can leave parties with the feeling that all the facts have not come out. There are occasions when arbitration is a necessary alternative but be mindful that arbitration decisions, for the most part, cannot be appealed. Thus, a participant in that process pays the arbitrator, pays the provider, pays counsel, is limited in what can be sought in discovery and is left with little, if any, recourse in the event of an unfavorable ruling.
Mediation on the other hand, where parties sit with counsel and a third party can often be an effective way to bring closure to a matter, sooner rather than later, and allows the participants to have more say in shaping the outcome of the matter. Certainly, ADR is here to stay and provides an alternative to court and, thus, serves an important function but when entering into a contractual arrangement, be mindful of what rights you lose when agreeing to arbitration and certainly consult with an attorney with any questions.